Carnival lifts Q3 profit on Europe, US recovery and China strength, raises outlook

Carnival posted non-GAAP net income of $1.2bn, or $1.58 diluted earnings per share, up from non-GAAP net income for Q3 2013 of $1.1bn, or $1.38 EPS. US GAAP net income, which included net unrealized gains on fuel derivatives of $15m, was $1.2bn, or $1.60 EPS, compared to Q3 2013's $934m, or $1.20 diluted EPS. The year-ago quarter included impairments net of unrealized gains on fuel derivatives of $139m.

The results were better than Wall Street's $1.44 EPS forecast.

It was the first positive quarter of yield for Carnival since Q1 2012 and significantly better than expectations, noted Robin Farley of UBS Investment Research.

Revenues were $4.9bn, up from $4.7bn.

Based on the strength of third quarter net revenue yields and current booking trends, Carnival increased its expectations for full year 2014 net revenue yields on a constant dollar basis to be in line with the prior year, from its previous guidance of down slightly. Excluding fuel, the company expects full year net cruise costs per ALBD to be slightly higher than 2013 a constant dollar basis.

As a result, Carnival raised its 2014 non-GAAP diluted EPS guidance to range of $1.84 to $1.88, better than both June guidance of $1.60 to $1.75 and 2013 non-GAAP diluted EPS of $1.58. The forecast is above Wall Street's $1.75 consensus.

Non-GAAP diluted EPS for Q4 is expected to be in the range of 15 cents to 19 cents per share versus 2013's 4 cents per share. The guidance is slightly under the 21-cent consensus forecast.

Carnival said cumulative advance bookings for the first half of 2015 are ahead of the prior year at higher prices. Over the last quarter, fleetwide booking volumes for the first half of 2015 have been running ahead of the prior year at higher prices.

'Strong close-in demand and higher on-board spending helped drive significantly better than expected third quarter results and 15% year-over-year earnings improvement,' Carnival Corp. & plc president and ceo Arnold Donald said. 'Our Asia operations performed particularly well during the quarter, driven by a double-digit yield increase in our China program.'

Donald said Carnival's continental European operations also posted strong yield and profit improvement, reflecting continued progress for the Costa brand. In addition, the summer Caribbean product attracted nearly 20% more passengers than the prior year.